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In re Hawkins Mortg. Co.

June 22, 1933

IN RE HAWKINS MORTG. CO. HOCH ET AL.
v.
WALLACE



Appeals from the District Court of the United States for the Southern District of Indiana, Indianapolis Division.

Author: Evans

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

EVANS, Circuit Judge.

Two appeals have been taken from the same order of the District Court, and they will be disposed of in a single opinion. Appellants have taken two appeals because uncertain whether the order appealed from was entered in such a proceeding in the administration of the bankrupt estate of the Hawkins Mortgage Company as to necessitate the exercise of discretion by this court, in allowing the appeal as provided by Section 47, Title, 11, U.S.C. (11 USCA ยง 47).

On December 30, 1924, the Hawkins Mortgage Company, a Delaware corporation, was adjudged a bankrupt by the United States District Court for the District of Indiana. Wallace was duly elected trustee on January 28, 1925. Hearings on claims were had, and the referee allowed some and disallowed others and fixed the order of priority of payments. Thereafter, the Hawkins Mortgage Company filed a petition with the trustee praying for an order directing said trustee to turn over to it all surplus remaining in the possession and custody of the trustee. The application was denied.

Thereafter, on March 11, 1932, one Hoch was appointed receiver of said Hawkins Mortgage Company by the Court of Chancery of the State of Delaware upon a showing that the charter of said company had become void through its failure to pay, for several successive years, the franchise taxes assessed against it. Bankrupt consented to, and joined in the request for, the appointment of the receiver. Whitaker was thereafter appointed ancillary receiver by the Jay County Court of Indiana.

The contest is one between the receivers of the bankrupt company and the trustee in bankruptcy for the possession of, and the right to distribute, moneys now in the hands of the trustee. The assets of said bankrupt have been reduced to cash by the trustee in bankruptcy. The allowed claims exceed the assets by a large amount. Appellants, however, assert that most of the claims should have been disallowed because they are predicated on and arise out of sales of stock (common and preferred) which sales were induced by fraudulent representations of agents and officers of the bankrupt.

Appellants petitioned the referee for an order directing the trustee to pay over to them

"All other assets of every kind, character and description which the said Trustee in Bankruptcy now has or hereafter may have after the payment in full by said Trustee in Bankruptcy of the claims of general creditors * * * and after payment of the lawful expenses of administration of the estate, * * *

"That so much of the order entered herein by the Referee on the 29th day of July, 1931 allowing each claim upon preferred stock * * * and allowing each claim upon common stock of the Hawkins Mortgage Company * * * be vacated, set aside * * * ."

The trustee in bankruptcy moved to dismiss this petition, and the matter was certified to the United States District Court after the referee had ordered appellants' petition dismissed. The District Judge sustained the order of dismissal.

It is first necessary for us to determine the nature of the order appealed from that we may ascertain which appeal lies. We conclude that the order is one from which an appeal may be taken only when this court in the exercise of a sound discretion authorizes it, and therefore Appeal No. 4982 must be dismissed.

As to Appeal No. 4968. Appellee first argues that inasmuch as the power of the Circuit Court of Appeals to superintend and revise the proceedings of the courts of bankruptcy within their jurisdiction "shall be exercised by appeal * * * and [shall] be allowed in the discretion of the appellate court," this court should not exercise its discretion in favor of the appellants upon facts so devoid of merit as those shown in the record before us.

When appellants applied for an order allowing the appeal, there was but one judge present, who, to protect the rights of both parties, allowed the appeal but at the same time entertained a motion to vacate the same. It was ordered that both matters be heard before the court in banc after briefs had been ...


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